Module3HWSol - 0.0745/4 – 1 = 1.88% d) Effective...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Module 3 Chapter 2 D3 Total amount of interest = $175,000 - $150,000 = $25,000 Interest each year = $25,000 ÷ 4 = $6,250 Annual interest rate = $6,250 ÷ $150,000 = 0.0417 = 4.17% D4 Year Loan Balance Interest Accrued 1 $85,000 × 1.045 = $88,825 $88,825 $85,000 = $3,825 2 $85,000 × 1.045 2 = $92,822 $92,822 $85,000 = $7,822 3 $85,000 × 1.045 3 = $96,999 $96,999 $85,000 = $11,999 4 $85,000 × 1.045 4 = $101,364 $101,364 $85,000 = $16,364 5 $85,000 × 1.045 5 = $105,925 $105,925 $85,000 = $20,925 D6 a) Effective monthly interest rate = 6.25% ÷ 12 = 0.521% b) Effective quarterly interest rate = (1 + 0.00521) 3 1 = 1.57% c) Effective semiannual interest rate = (1 + 0.00521) 6 1 = 3.17% d) Effective annual interest rate = (1 + 0.00521) 12 1 = 6.43% D9 a) Effective daily interest rate = e 0.0745/365 1 = 0.02% b) Effective monthly interest rate = e 0.0745/12 1 = 0.62% c) Effective quarterly interest rate = e
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 0.0745/4 – 1 = 1.88% d) Effective semiannual interest rate = e 0.0745/2 – 1 = 3.80% e) Effective annual interest rate = e 0.0745 – 1 = 7.73% D14 Effective annual interest rate of first investment = . Effective annual interest rate of second investment = . The first investment is better. D15 Effective annual interest rate of first loan = 7.35 . Effective annual interest rate of second loan = . The first loan is cheaper. A4 Effective annual interest (1 st local bank) = Total interest (1 st local bank) = Effective annual interest (2 nd local bank) = The loan from the first local bank is cheaper. A5 Total interest if loan is paid off after 1 year = EUR54.2M × 1.0575 – EUR54.2M = EUR3.117M Total interest if loan is paid off after 2 years = EUR54.2M × 1.0575 2 – EUR54.2M = EUR6.412M The company will save EUR6.412M – EUR3.117M = EUR3.30M...
View Full Document

This note was uploaded on 01/11/2012 for the course EIN 4354 taught by Professor Tufecki during the Fall '08 term at University of Florida.

Page1 / 2

Module3HWSol - 0.0745/4 – 1 = 1.88% d) Effective...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online